Wednesday, February 10, 2010

End Casino Capitalism

At any single time, 1st World investment managers handle $150 trillion in bank savings, stocks and bonds and other financial instruments. Theoretically a mere 20% of the mammoth amount if invested in new 3rd World companies will employ all the world’s bottom poor. Unfortunately no such thing happens. The few thousand handlers of the gargantuan capital use around $1.4 trillion each day ‘gambling’ in the rise and fall of currencies. Concurrently, over $500 billion yearly go to stock and bond speculation. From 1992 to 1998, just 12 First World companies lost $25 billion betting on the rise and fall in the prices of oil, commodities, and interest rates. Obviously capital 'gambled away' in casino-style stock markets produce no new wealth. Old wealth simply transfer from losers to winners.

So why do investment managers 'gamble' hard-earned moneys entrusted to them by the world's companies? Main reason is the scarcity of companies that give good returns to capital. According to studies, the largest companies in the 1st World get up to 75% of 'new capital' out of profitable operations, not from the stock markets. For their part, investment managers are so scared of making bad investments that they dedicate just 1-3% of billion-dollar funds in startups.

In the 1980s many of such small startups eventually became billion-dollar corporations. The many concurrent failures however got more media attention, for the 'top courageous' startup financier M. Milken was jailed for supposed fraud, a victim of ambitious politicians. However Milken has been hailed by many people as a hero because he started a culture of selling stock shares and bonds to ordinary US employees. To date, the culture has enabled half of US families to become major shareholders in over half of US companies. Small startup companies taken together created a lot more jobs than the old majors. Investment courage enriched the US masses.

Our anti-poverty lesson thereby becomes obvious: why not jack up 1st World investment courage and use a major percentage of 'gambling capital' towards building new world-scale companies in the 3rd World? Since private investment managers won't do it, world governments have to step in. It takes just two laws to redeem the 3rd World poor this way, and at good profit to redeemers. 3rd World governments pass a Loans for Mass Entrepreneurship (LME) law. An LME law channels a major portion of yearly state budget towards lending to thousand-employee groups that set up joint ventures with 1st World corporations. Concurrently, 1st World governments pass an Expand World Markets (EWM) law. An EWM law dedicates a major portion of yearly state budgets plus 5-10% of investment companies' funds towards lending to 3rd World joint ventures arising from LME laws.

What happens next may be a matter of course. Since laws are forever unless repealed, the twin laws will routinely build thousands of joint venture companies and create millions of jobs for 3rd World poor every year, for all eternity. Trillions of dollars in repaid LME/EWM loans (becoming stock shares) plus dividend issues build fortunes in the hands of 3rd World employee masses. The new 3rd World joint ventures should learn to conduct joint planning to avoid market overcrowding that bankrupts industries and creates investment scares. A high percentage of resultant successes builds and cements the investment trust that channels increasingly larger portions of the world's over $150 trillion in investment capital. Stock market 'gambling' that at times results to trillion-dollar destruction of wealth held by investing publics tones down.

Now for the critical question: who persuades world governments to pass the twin laws? At this stage, only blogging nets have the worldwide reach to do it, initially by popularizing the 'sideline income' dream among two billion non-blogging employees worldwide.

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